Business Jets over 5.7 tonnes to be charged APD after April 2013

Date added: December 10, 2011

Business jets will be charged Air Passenger Duty from April 2013. The Treasury says the reason for not charging it from April 2012 is that “changes will bring a substantial number of new operators into the APD regime and will require the introduction of special rules tailored to business aviation.” APD will be charged on any jet with more than around 6 – 8 seats, depending on the model. Many private jets in practice carry just 2 or 3 passengers. AEF figures on the CO2 emissions per private jet passenger, compared to premium class on a commercial airline, show them to be 3 – 8 times higher.

Following the announcement in the Autumn Statement, the Treasury has now confirmed, in its response to the Air Passenger Duty consultation, that APD rates will rise in line with inflation from April 2012. The new rates were set out in full in the Treasury document.

The Treasury gives the details of a new duty to be levied on business jets over 5.7 tonnes from April 2013.

All flights on aircraft under 20 tonnes or with 19 seats or more will be subject to the same distance banding structure and rates of APD that apply to passengers taking commercial flights, with the distance between rows of seats determining whether the higher or lower rate is charged.

For aircraft of 20 tonnes or more, with fewer than 19 seats (those providing a premium service), duty rates equivalent to double the ‘standard’ APD rate (ie the higher rate) in each respective distance band will apply. The Treasury recognises that aircraft of 20 tonnes or more, with fewer than 19 seats, generally provide a higher class of service. There is no difference in APD according to distance of the business flight.

From the current jet range of Cessna, the world’s leading business jet maker by volume, only its five-seat, 1,150nm-range Citation Mustang (3.9 tonnes) and 8-9-seat, 1,613nm-range CJ2+ (5.68 tonnes) squeak under this 5.7 tonne limit. Cessna’s 7-8 seat, 1,875nm-range CJ3 (6.3 tonnes) and 8-9-seat, 2002nm-range CJ4 (7.7 tonnes) are heavier than the cutoff.

The Treasury estimates that the extension to include all flights of 5.7 tonnes or more will bring around 50,000 additional flights within the scope of APD. Consultation with the industry revealed that business jet flights carry an average of around 2 -3 passengers per flight. It is expected that the majority of these passengers are relatively high-income individuals travelling on business. The majority of business jet passengers are male. No other equalities impacts are expected. [The APD consultation, which started in March 2011, said “There is limited data on individuals flying aboard business jets. It is estimated that passengers flying on around 80,000-90,000 ‘business jet’ flights would be liable to pay this new charge from 2012-13.” (page 32 of consultation document).

Until now, these flights have not been subject to air passenger duty despite travellers on commercial airline services having to pay duty of about £12 (rising to £13 in April 2012) for short-haul journeys and up to £110 for long-haul flights. The new rules would extend this to almost all air passengers.

Some operators have complained vociferously about APD being extended to private jets. But others are more resigned to the tax. Alex Berry, group executive sales and marketing director at Chapman Freeborn, the world’s biggest charter company by revenue, says the levy is equitable. “There’s no reason why a person going on a private jet to Malaga shouldn’t pay tax, while a family of four going on holiday should.

“Our customers are not going to stop flying because of the cost – £30, £40 or £50 a trip. It’s a nominal cost compared with running an aeroplane.”

He adds that private jet operators are likely to pass on the cost to passengers rather than bearing the price themselves, which should should ease any increase in pressure on the operators themselves.

Some analysts agree. “Given that chartering even a small private jet can cost approximately £10,000 per hour, the level of air passenger duty charges imposed by the chancellor would have to be quite high for demand to be negatively affected, in our view,” says Adrian Murray of Oriel Securities. ( link – FT article May 2011)

“The number of potential flights carrying passengers from the UK in our sector is closer to 24,000 per annum and the average number of passengers per flight is less than 3. Because of the nature of business aviation many of the flights are positioning flights without passengers on board. ”

and

The Government accepts that the extension of APD to business aviation should distinguish between short-haul and long-haul flights, and recognises that there is a range of comfort aboard flights which should be reflected in the rates of APD charged. [But it gives no detail on different bands of APD according to distance].

Page 7 The Government will introduce a special scheme, which allows business aviation operators who elect into the scheme to estimate their average passenger numbers for the purposes of APD. This will minimise administration and compliance burdens. The Government will discuss the design of the scheme with industry.

These changes will bring a substantial number of new operators into the APD regime and will require the introduction of special rules tailored to business aviation. The Government has therefore decided to delay the implementation date until April 2013

The document says:

The extension of APD to business jet flights is not expected to have a significant effect on overall demand, given that generally APD will account for only a small fraction of the final price of hiring a business jet.

On Page 14 it gives financial figures of the money it expects the tax to cost private jet operators, and the costs to the government on instituting the tax and administering it.

The Aviation Environment Federation (AEF) have done some calculations on the amount of carbon private jets emit:

Examples of rough estimates of ‘bizjet’ emissions

CO2 emissions per passenger from business jets compared with average emissions from commercial aircraft (one way, not return):

Citation X

Dassault Falcon 50EX

Commercial airline: premium

Commercial airline: economy

London (LHR) to Lisbon1,564 Km

845.712 kg CO2

761.25 kg CO2

141.73 Kg of CO2

132.2 kg CO2

London to New York5,538 Km

2994.67 kg CO2

2695.53 kg CO2

760.22 kg CO2

380.11 kg of CO2

(Note that aviation’s impact on climate is in fact greater than that of CO2 alone so caution would be needed in comparing these figures with those from other transport modes. The climate changing effect is about double that of CO2 alone, due to other gas interactions, and formation of cirrus cloud. These are, of course, the same for business jets or commercial jets, so do not affect this comparison).

Billionaires to be given free carbon allowances to offset green tax on private jets

Corporate jets owned by very rich people and large companies will be given some free carbon permits under the ETS when it starts in January. Some 200 corporate jet owners will benefit. Flying Lion, the company used by Lord Ashcroft, will initially get 24 allowances per year worth €240 at today’s prices (€10 each). DECC said aircraft operators had to submit flying data this spring to qualify for relief of up to 85% of their total bill by free allowances in the 1st year.

Private jets carry 2.7 passengers on average – Farnborough

Brandon O’Reilly, the chief executive of TAG Farnborough Airport, the companythat owns and operates the airfield, said that on a fairly typical day last weekthere were just 2.7 passengers per flight, adding that the actual average figurecould be even lower. TAG’s revelation has caused outrage among environmental groups. Hugh Sheppard, of the Campaign for the Protection of Rural England (CPRE) said the figures had revealed the “gross inefficiency” of private jets.